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It still smarts when Terri Getman recalls the financial disaster that befell her family because her father didn't plan ahead. He owned a minority stake in a closely held Georgia paper-making machinery manufacturer, but died suddenly six months after the business was launched.

With no written plan outlining his ownership rights, the family was cut out by the other partners. These owners later sold the business to a German firm for a handsome profit, pocketing the funds themselves. "We did 11 years of litigation to get nothing," Getman ruefully recalls.

Her story is far from unique. A study of more than 1,400 business owners conducted last April by investment consulting firm The Monitor Group in McLean, Virginia, revealed that more than 82 percent had no written plan describing what they'd like to see happen when they leave the business.

The result is often lost income to the founder or his or her heirs, and a business that doesn't thrive or even survive after the founder's departure. Consider two more tales of transitions gone wrong.

A story in the Puget Sound Business Journal explains that when Wilson Products Inc. owner Kenneth Wilson died unexpectedly in 2003, his three daughters found themselves in charge of Wilson's $12 million aircraft-parts business. All three had grown up around the Auburn, Washington-based company but were never trained to take the helm.

With the aerospace industry going through rapid change, the business floundered, filing for bankruptcy last year. With $20 million in orders on the books, the Wilsons couldn't find a buyer, and the company's assets were auctioned.

According to the St. Louis Business Journal the second-generation owner of Missouri frozen custard company Southern Products Co., fought with his son Mark Dorsey over how the business was run. So the younger Dorsey left in 2004, got his MBA, and started a competitor, Pacific Valley Dairy Inc.

Southern Products, which had $100 million in annual sales, went bankrupt in 2005. The winning bidder at the 56-year-old company's bankruptcy auction was Pacific Valley Dairy, which paid less than $3 million for it.

With so much at stake, why do so few entrepreneurs plan for their departure? Such planning brings up a host of uncomfortable issues, including death, the company's true value, and often, touchy family relationships.

"People know they have to prepare themselves, their family and their business to have a well-planned and well-valued sale transaction," says The Monitor Group president Glenn Kautt. "But most aren't doing it."

Experts say even owners who don't have a clear sense of when or how they'd like to leave their business can get the process rolling with a few basic steps.

1. Write Down Your Wishes
Begin by mapping out what you'd like to see happen when you depart. Then create a timeline for when you'd like that to occur, says Trudy Nearn, owner of Sacramento, California, estate-planning law firm Generations.

"People either haven't thought about it at all, or they have unrealistic expectations," she says.

She recalls one client who wanted to leave her day-care center to one daughter while leaving the land under it to another daughter. The owner assumed this second daughter would be willing to charge the day-care center affordable rent.

Nearn pointed out that the land-owning daughter would want to maximize the value of her inheritance. So instead, one daughter inherited the business and land while the other got an insurance policy of equal value.

An important part of planning is envisioning what the owner wants to do after departing the business, says University of Massachusetts Family Business Center director Ira Bryck. Some fear they'll be unhappy and bored once they relinquish their position. In fact, less than 17 percent of respondents in the Monitor study imagined they would retire after leaving their business. More than 45 percent said they planned to start another company. Still others relinquish control but stay on in smaller roles. In any case, having a plan for your next chapter can be the impetus to move forward.

2. Start Documenting
If you can't spell out company policies and procedures, your company may not be salable, says Jerry Zyskowsky, a volunteer counselor for SCORE in Seattle.

He recently worked with a family where the mother was a silent partner with her two sons in a lucrative equipment-evaluation firm. They wanted to sell, but after 18 months of trying to document company operations, he recalls, all the sons came up with were a few spiral note-books filled with hasty scribbles and handwritten notes.

"The company was useless unless you had the brains of these two sons," Zyskowsky says. "There were no means to transfer ownership."

Sometimes a business entails holding crucial licenses or skills. Attorney Stuart Dorsett of Ward and Smith in Raleigh, North Carolina, worked with one heating and cooling company that was nearly ruined by a documentation snarl after the owner died unexpectedly. The company's work required a state license, which demanded extensive training and testing. The owner was the only person at the company who was licensed. When he died, the business had to close its doors the next day.

"We were able to rescue the situation by finding a semiretired guy who was licensed and coaxing him back to work, while the family maneuvered to sell the business," Dorsett says. "But potentially, it was just a disaster."

3. Select and Groom Successors
Many business owners don't leave enough time to properly prepare their intended successor, says David Paradise, president of the Family Business Resource Center in Newton, Massachusetts. They forget that training may reveal that their first choice isn't going to work out, forcing them to restart the process with a new person.

Business owners need to assess their heir apparent's skills and design a training program to beef up their weak points. If the likely heir has been a marketing vice president, for instance, he or she may need extensive training in logistics or handling customers, vendors or bankers. According to Paradise, "There should be a formal training process with specific criteria written down."

One third-generation business owner who benefited from an extensive training program was Laura Michaud. She stepped into management at hearing-aid company Beltone Electronics Corp. in 1980. Now an Elmhurst, Illinois, business consultant after selling Beltone in 1997, Michaud recalls that as part of her management training, her father plunged her into all aspects of the business, even asking her to make a hearing aid.

"I learned to appreciate other people's jobs," she says. "You need to work in all areas of operations."

Valuation, Finances and Planning

4. Get a ValuationMany owners only have a vague idea of their company's worth. Of Monitor survey respondents who answered a question about valuation, a shocking 61 percent were uncertain how companies in their industry were valued.

To get the best price and to satisfy the IRS, owners need a professional opinion. Gerald Barney, president and principal shareholder of valuation firm American ValueMetrics Corp. in Ojai, California, says he scrutinizes a business's balance sheet and earnings track record, then consults national databases to find comparable business sales. Barney says he applies various formulas, depending on the business' size, to help determine the asking price. For smaller businesses, cash flow is a key metric.

Entrepreneurs often think their company will be worth nothing if they're gone, but companies have other assets--such as their customer list and brand equity in their market--that Barney says buyers often pay good money for.

5. Work Out the Finances
When imagining the financial side of their exit, Kautt says many owners live "in an absolute fantasy." In the Monitor study, more than 36 percent thought they would retain full ownership while not having to run the business.

In fact, most business owners will need to transfer some or all of the value of the company to someone else when they depart. Deciding how and when to do that is the most complex part of the transition plan.

Armed with a solid valuation, the owner could sell the business outright. A buyer might pay cash or want to pay out the price over time, a scheme that could offer a steady retirement income for the owner.

Owners seeking to shift company ownership to family members can incorporate the business and create transferable shares, says Tom Cronin, managing director in the national tax practice for RSM McGladrey in Minneapolis. Shares can then be gradually given to children--up to $11,000 per owner per year tax-free. If employees or partners are buying out the owner, they could purchase the shares. The gradual switch may also help the owner preserve a retirement income stream.

If you're planning to stay with your business until you die, it's important to think ahead. A prenegotiated contract known as a buy-sell agreement, paired with life insurance to fund the ownership transfer, is often used in these instances, says Getman, who is vice president of advanced marketing at Prudential Financial. For instance, if an owner wants to sell to their child, a price--or a formula for determining the value later--would be agreed upon. A life insurance policy taken out on the owner for the sale amount, naming the child as beneficiary, would fund the purchase after the owner's death. Similar buy-sell agreements can be made with partners or key managers, compelling partners to buy out heirs' stakes in the business.

Such deals must be structured carefully. Getman says that frequently, a partner ends up with a lump of cash from a life insurance policy and no obligation to pay off the heirs. A poorly crafted policy can also leave heirs paying taxes on what should have been tax-free money.

6. Plan for Change
Whatever your transition plan, remember that it will need regular updating. Market conditions change, as do owners' and heirs' personal goals. Says Paradise, "These things don't have to be carved in stone for 50 years."